82 FR 10933 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Sections I and II of the Pricing Schedule
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 31 (February 16, 2017)
Federal Register Volume 82, Issue 31 (February 16, 2017)
| Page Range | 10933-10940 | |
| FR Document | 2017-03099 |
[Federal Register Volume 82, Number 31 (Thursday, February 16, 2017)] [Notices] [Pages 10933-10940] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-03099] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80008; File No. SR-Phlx-2017-09] Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Sections I and II of the Pricing Schedule February 10, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that, on February 1, 2017, NASDAQ PHLX LLC (``Phlx'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange's Pricing Schedule at Section I, entitled ``Rebates and Fees for Adding and Removing Liquidity in SPY,'' and Section II, entitled ``Multiply Listed Options Fees'' \3\ to amend various transaction fees and rebates. --------------------------------------------------------------------------- \3\ Multiply Listed Options includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed. --------------------------------------------------------------------------- The text of the proposed rule change is available on the Exchange's Web site at http://nasdaqphlx.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission's Public Reference Room. II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Exchange's Pricing Schedule at Section I, entitled ``Rebates and Fees for Adding and Removing Liquidity in SPY,'' to (i) amend the Simple Order Rebate for Adding Liquidity which is paid to Specialists \4\ and Market Makers; \5\ --------------------------------------------------------------------------- \4\ The term ``Specialist'' applies to transactions for the account of a Specialist (as defined in Exchange Rule 1020(a)). \5\ The term ``Market Maker'' describes fees and rebates applicable to Registered Options Traders (``ROT''), Streaming Quote Traders (``SQT'') and Remote Streaming Quote Traders (``RSQT''). A ROT is defined in Exchange Rule 1014(b) as a regular member of the Exchange located on the trading floor who has received permission from the Exchange to trade in options for his own account. A ROT includes SQTs and RSQTs as well as on and off-floor ROTS. An SQT is defined in Exchange Rule 1014(b)(ii)(A) as an ROT who has received permission from the Exchange to generate and submit option quotations electronically in options to which such SQT is assigned. An RSQT is defined in Exchange Rule in 1014(b)(ii)(B) as an ROT that is a member affiliated with an RSQTO with no physical trading floor presence who has received permission from the Exchange to generate and submit option quotations electronically in options to which such RSQT has been assigned. A Remote Streaming Quote Trader Organization or ``RSQTO,'' which may also be referred to as a Remote Market Making Organization (``RMO''), is a member organization in good standing that satisfies the RSQTO readiness requirements in Rule 507(a). --------------------------------------------------------------------------- [[Page 10934]] (ii) increase the Specialist, Market Maker, Firm,\6\ Broker-Dealer \7\ and Professional \8\ Simple Order Fees for Removing Liquidity; and (iii) increase the Specialist and Market Maker Complex Order \9\ Fees for Removing Liquidity. The amendments will be described in greater detail below. --------------------------------------------------------------------------- \6\ The term ``Firm'' applies to any transaction that is identified by a member or member organization for clearing in the Firm range at The Options Clearing Corporation. \7\ The term ``Broker-Dealer'' applies to any transaction which is not subject to any of the other transaction fees applicable within a particular category. \8\ The term ``Professional'' applies to transactions for the accounts of Professionals, as defined in Exchange Rule 1000(b)(14). \9\ A Complex Order is an order involving the simultaneous purchase and/or sale of two or more different options series in the same underlying security, priced as a net debit or credit based on the relative prices of the individual components, for the same account, for the purpose of executing a particular investment strategy. --------------------------------------------------------------------------- The Exchange also proposes to amend the Exchange's Pricing Schedule at Section II, entitled ``Multiply Listed Options Fees,'' to: (i) Remove the applicability of note 2 in the Pricing Schedule and thereby increase the Professional, Broker-Dealer and Firm electronic Complex Orders in non-Penny Pilot Options; (ii) amend the lower transaction fee for Professional, Broker-Dealer and Firm electronic Complex Orders in Penny Pilot Options; and (iii) amend the transaction fee assessed to Professional, Broker-Dealer and Firm electronic Complex Orders in non- Penny Pilot Options if they are under Common Ownership with another member or member organization or an Appointed OFP of an Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule.\10\ The amendments will be described in greater detail below. --------------------------------------------------------------------------- \10\ Section B of the Pricing Schedule contains Customer Rebate Tiers which are calculated by totaling Customer volume in Multiply Listed Options (including SPY) that are electronically-delivered and executed, except volume associated with electronic QCC Orders, as defined in Exchange Rule 1080(o). Rebates are paid on Customer Rebate Tiers according to certain categories. Members and member organizations under Common Ownership may aggregate their Customer volume for purposes of calculating the Customer Rebate Tiers and receiving rebates. Affiliated Entities may aggregate their Customer volume for purposes of calculating the Customer Rebate Tiers and receiving rebates. See Section B of the Pricing Schedule. --------------------------------------------------------------------------- Proposed Amendments to Section I: Rebates and Fees for Adding and Removing Liquidity in SPY Section I of the Pricing Schedule contains fees and rebates applicable to options overlying Standard and Poor's Depositary Receipts/SPDRs (``SPY'').\11\ The Exchange specifies which fees and rebates apply to Simple Orders and Complex Orders within this section. --------------------------------------------------------------------------- \11\ Options overlying Standard and Poor's Depositary Receipts/ SPDRs (``SPY'') are based on the SPDR exchange-traded fund (``ETF''), which is designed to track the performance of the S&P 500 Index. --------------------------------------------------------------------------- Simple Order Today, Simple Order Rebates for Adding Liquidity are paid as noted below to Specialists and Market Makers adding the requisite amount of electronically executed Specialist and Market Maker Simple Order contracts per day in a month in SPY: ------------------------------------------------------------------------ Rebate for Tiers Monthly volume adding liquidity ------------------------------------------------------------------------ 1................................. 1 to 2,499.......... $0.15 2................................. 2,500 to 4,999...... 0.20 3................................. 5,000 to 19,999..... 0.25 4................................. 20,000 to 34,999.... 0.30 5................................. 35,000 to 49,999.... 0.32 6................................. greater than 49,999. 0.35 ------------------------------------------------------------------------ All other market participants do not receive a SPY Simple Order Rebate for Adding Liquidity. The Exchange proposes to amend the Simple Order Rebates for Adding Liquidity which are paid to Specialists and Market Makers by reducing the number of tiers from 6 tiers to 5 tiers. The Exchange proposes to amend Tier 2 to reduce the Rebate for Adding Liquidity from $0.20 to $0.18 per contract. The Exchange proposes to amend Tier 3 to reduce the Rebate for Adding Liquidity from $0.25 to $0.21 per contract. The monthly volume per day for Tiers 2 and 3 are not being amended. With respect to Tier 4, the Exchange proposes to amend the monthly volume per day from 20,000 to 34,999 contracts to 20,000 to 49,999 contracts. The Exchange proposes to increase the Tier 4 rebate from $0.30 to $0.31 per contract. The Exchange proposes to eliminate current Tier 5. The Exchange proposes to rename Tier 6 to be new Tier 5. No other amendments are proposed to new renamed Tier 5.\12\ --------------------------------------------------------------------------- \12\ Tier 1 is not being amended. --------------------------------------------------------------------------- The Exchange also proposes to rename the column entitled ``Monthly Volume'' as ``Average Daily Volume (``ADV'').'' The Exchange believes that this title more accurately describes the manner in which the rebate is calculated, which is adding the requisite amount of electronically executed Specialist and Market Maker Simple Order contracts per day in a month in SPY, as noted in Part A of Section I of the Pricing Schedule. This proposed change does not impact the manner in which the Exchange calculates these rebates today. The Exchange's proposal for the Simple Order Rebates for Adding Liquidity which are paid to Specialists and Market Makers would be as follows: ------------------------------------------------------------------------ Rebate for Tiers Average daily adding volume (``ADV'') liquidity ------------------------------------------------------------------------ 1................................. 1 to 2,499.......... $0.15 2................................. 2,500 to 4,999...... 0.18 3................................. 5,000 to 19,999..... 0.21 4................................. 20,000 to 49,999.... 0.31 5................................. greater than 49,999. 0.35 ------------------------------------------------------------------------ The Exchange believes that the proposed five tier rebate structure will incentivize market participants to add a greater amount of Specialist and Market Maker liquidity in SPY on the Exchange to obtain higher rebates. The Exchange also proposes to amend the Simple Order Fees for Removing Liquidity in SPY for Specialists, Market Makers, Firms, Broker Dealers and Professionals by increasing the fees from $0.47 to $0.48 per contract. The Customer \13\ Simple Order Fee for Removing Liquidity is not being amended and will remain at $0.45 per contract. Despite the increased fee, the Exchange believes that its fees for Simple Orders in SPY remain competitive. --------------------------------------------------------------------------- \13\ The term ``Customer'' applies to any transaction that is identified by a member or member organization for clearing in the Customer range at The Options Clearing Corporation which is not for the account of a broker or dealer or for the account of a ``Professional'' (as that term is defined in Rule 1000(b)(14)). --------------------------------------------------------------------------- Complex Order The Exchange proposes to amend its Complex Order Fees for Removing Liquidity in SPY for Specialists and Market Makers by increasing the fees from $0.40 to $0.43 per contract. The Exchange would not increase the fees for Firms, Broker-Dealers or Professionals; those fees will remain at $0.50 per contract. Today, Customers are not assessed a Complex Order Fee for Removing Liquidity. Despite the increased fee, the Exchange believes that its fees for Complex Orders in SPY remain competitive. [[Page 10935]] Proposed Amendments to Section II: Multiple Listed Options Fees Penny Pilot Options The Exchange proposes to amend its Professional, Broker-Dealer and Firm electronic Penny Pilot Options Transaction Charges for Complex Orders. Today, the Exchange assesses Professionals, Broker-Dealers and Firms an electronic Penny Pilot Options Transaction Charges for Complex Orders of $0.35 per contract. The Exchange proposes to increase the Professional, Broker-Dealer and Firm electronic Penny Pilot Options Transaction Charges for Complex Orders to $0.40 per contract. Despite the increase to this fee, the Exchange believes the Penny Pilot Options Transaction Charges for electronic Complex Order transactions remain competitive. Professionals, Broker-Dealers and Firms will continue to be offered a discounted rate as compared to Simple Orders.\14\ --------------------------------------------------------------------------- \14\ The Exchange would continue to assess an electronic Penny Pilot Options Transaction Charges to Professionals, Broker-Dealers and Firms of $0.48 per contract for Simple Orders. --------------------------------------------------------------------------- Non-Penny Pilot Options The Exchange proposes to amend its Professional, Broker-Dealer and Firm electronic non-Penny Pilot Options Transaction Charges for Complex Orders. Today, the Exchange assesses Professionals, Broker-Dealers and Firms an electronic non-Penny Pilot Options Transaction Charges for Complex Orders of $0.35 per contract. The Exchange is proposing to remove the applicability of note 2 in the Pricing Schedule from the non-Penny Pilot Options Transaction Charges for Professionals, Broker- Dealers and Firms. With this proposal, Professional, Broker-Dealer and Firm electronic non-Penny Pilot Options Transaction Charges for Complex Orders would be increased to $0.75 per contract because the reduced rate would no longer apply. Members may still lower this rate if they qualified for the reduced rebate offered in note 3 in the Pricing Schedule, which note is also being amended with this proposal as noted below. As proposed, the Options Transaction Charge for Simple and Complex Order electronic non-Penny Pilot Options Transaction Charges would be the same fee of $0.75 per contract fee. The Exchange also proposes to amend its Professional, Broker-Dealer and Firm electronic non-Penny Pilot Options Transaction Charges by amending note 3 in the Pricing Schedule. Today, note 3 provides that any member or member organization under Common Ownership with another member or member organization or an Appointed OFP of an Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule \15\ will be assessed a Professional, Broker- Dealer or Firm electronic non-Penny Pilot Options Transaction Charge of $0.60 per contract. The Exchange proposes to amend the fee to assess $0.65 per contract. The qualifications for the reduced rate remain the same. Professionals, Broker-Dealers and Firms that do not qualify for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule would continue to pay an electronic non-Penny Pilot Options Transaction Charge of $0.75 per contract. While the Exchange is amending the fee so that the reduction is not as great as today, the Exchange will continue to offer a reduced rate to Professionals, Broker-Dealers and Firms that qualify by sending the requisite order flow to the Exchange. --------------------------------------------------------------------------- \15\ See note 10 above. --------------------------------------------------------------------------- Finally, the Exchange is adding a period at end of the sentence in footnote 3 to correct a typographical error. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act,\16\ in general, and furthers the objectives of Sections 6(b)(4) and 6(b)(5) of the Act,\17\ in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and issuers and other persons using any facility, and is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. --------------------------------------------------------------------------- \16\ 15 U.S.C. 78f(b). \17\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- The Commission and the courts have repeatedly expressed their preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. In Regulation NMS, while adopting a series of steps to improve the current market model, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ``has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.'' \18\ --------------------------------------------------------------------------- \18\ Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting Release''). --------------------------------------------------------------------------- Likewise, in NetCoalition v. Securities and Exchange Commission \19\ (``NetCoalition'') the D.C. Circuit upheld the Commission's use of a market-based approach in evaluating the fairness of market data fees against a challenge claiming that Congress mandated a cost-based approach.\20\ As the court emphasized, the Commission ``intended in Regulation NMS that `market forces, rather than regulatory requirements' play a role in determining the market data . . . to be made available to investors and at what cost.'' \21\ --------------------------------------------------------------------------- \19\ NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010). \20\ See NetCoalition, at 534--535. \21\ Id. at 537. --------------------------------------------------------------------------- Further, ``[n]o one disputes that competition for order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market system, buyers and sellers of securities, and the broker-dealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution'; [and] `no exchange can afford to take its market share percentages for granted' because `no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers' . . . .'' \22\ Although the court and the SEC were discussing the cash equities markets, the Exchange believes that these views apply with equal force to the options markets. --------------------------------------------------------------------------- \22\ Id. at 539 (quoting Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). --------------------------------------------------------------------------- Proposed Amendments to Section I: Rebates and Fees for Adding and Removing Liquidity in SPY Simple Order The Exchange's proposal to amend the Simple Order Rebates for Adding Liquidity which are paid to Specialists and Market Makers by reducing the number of tiers from 6 tiers to 5 tiers and reducing the Tier 2 rebate to $0.18 per contract, reducing the Tier 3 rebate to $0.21 per contract, amending the Tier 4 monthly volume to 20,000 to 49,999 contracts per day and the rebate to $0.31 per contract, eliminating Tier 5 and renaming Tier 6 to new Tier 5 is reasonable because the Exchange believes that the proposed five tier rebate structure will incentivize market participants to add a greater amount of Specialist and Market Maker liquidity in SPY on the Exchange to obtain higher rebates. A Specialist or Market Maker would continue to receive a rebate with this proposal provided they execute one electronic Simple Order SPY contract. In some cases, the rebate will be lower. When 2,500 to 4,999 electronic Simple Order SPY contracts per day are added, the SPY Simple Order Rebate for Adding Liquidity for Specialists and Market Makers will be $0.18 per contract as compared to $0.20 per [[Page 10936]] contract (today's rebate). With this proposal, the rebate would be lower for members currently submitting 5,000 to 19,999 SPY contracts per day, the rebate would be $0.21 per contract as compared to $.25 per contract. Members currently submitting between 20,000 and 34,999 SPY contracts would receive a $0.31 per contract as compared to $0.30 per contract rebate with this proposal, an increased rebate of $0.01 per contract. Finally, with this proposal, market participants currently submitting between 35,000 and 49,999 SPY contracts per day would receive a lower rebate of $0.31 per contract as compared to $0.32 per contract. Despite this decrease, the Exchange believes that participants will continue to be incentivized to add SPY order flow to the Exchange to receive the rebate. The Exchange's proposal to amend the Simple Order Rebates for Adding Liquidity which are paid to Specialists and Market Makers by reducing the number of tiers from 6 tiers to 5 tiers and reducing the Tier 2 rebate to $0.18 per contract, reducing the Tier 3 rebate to $0.21 per contract, amending the Tier 4 monthly volume to 20,000 to 49,999 contracts per day and the rebate to $0.31 per contract, eliminating Tier 5 and renaming Tier 6 to new Tier 5 is equitable and not unfairly discriminatory because Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\23\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \23\ See Rule 1014 titled ``Obligations and Restrictions Applicable to Specialists and Registered Options Traders.'' --------------------------------------------------------------------------- The Exchange's proposal to rename the column entitled ``Monthly Volume'' as ``Average Daily Volume (``ADV'')'' is reasonable, equitable and not unfairly discriminatory because the title more accurately describes the manner in which the rebate is calculated, which is adding the requisite amount of electronically executed Specialist and Market Maker Simple Order contracts per day in a month in SPY, as noted in Part A of Section I of the Pricing Schedule. This proposed change does not impact the manner in which the Exchange calculates these rebates today. The Exchange's proposal to amend the Simple Order Fees for Removing Liquidity for Specialists, Market Makers, Firms, Broker Dealers and Professionals by increasing the fees from $0.47 to $0.48 per contract is reasonable because despite the increased fee, the Exchange believes that its fees for Simple Orders in SPY remain competitive. The Customer Simple Order Fee for Removing Liquidity is not being amended and will remain at $0.45 per contract. Also, the increase in the Simple Order Fees for Removing Liquidity will continue to support the rebate structure proposed herein, which as stated above, attracts Specialists and Market Makers. An increase in the activity of Specialists and Market Makers in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. The Exchange's proposal to amend the Simple Order Fees for Removing Liquidity for Specialists, Market Makers, Firms, Broker Dealers and Professionals by increasing the fees from $0.47 to $0.48 per contract is equitable and not unfairly discriminatory because all participants would continue to be assessed a similar fee, except for Customers. The Exchange believes that assessing Customers a lower fee is equitable and not unfairly discriminatory because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Complex Order The Exchange's proposal to amend its Complex Order Fees for Removing Liquidity for Specialists and Market Makers by increasing the fees from $0.40 to $0.43 per contract is reasonable because despite the increased fee, the Exchange believes that its fees for Complex Orders in SPY remain competitive. Also, Specialists and Market Makers continue to be assessed a lower fee as compared to Firms, Broker-Dealers or Professionals; who are assessed $0.50 per contract. The Exchange's proposal to amend its Complex Order Fees for Removing Liquidity for Specialists and Market Makers by increasing the fees from $0.40 to $0.43 per contract is equitable and not unfairly discriminatory. Unlike other market participants, Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\24\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Customers continue to be assessed no Complex Order Fee for Removing Liquidity because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \24\ Id. --------------------------------------------------------------------------- Proposed Amendments to Section II: Multiple Listed Options Fees Penny Pilot Options The Exchange's proposal to amend its Professional, Broker-Dealer and Firm electronic Penny Pilot Options Transaction Charges for Complex Orders from $0.35 per contract to $0.40 per contract is reasonable because despite the increase to this fee, the Exchange believes the Penny Pilot Options Transaction Charges for electronic Complex Order transactions remain competitive. Professionals, Broker-Dealers and Firms and will continue to be offered a discounted rate as compared to Simple Orders which will continue to be assessed $0.48 per contract. [[Page 10937]] The Exchange's proposal to amend its Professional, Broker-Dealer and Firm electronic Penny Pilot Options Transaction Charges for Complex Orders from $0.35 per contract to $0.40 per contract is equitable and not unfairly discriminatory because Professionals, Broker-Dealers and Firms would be uniformly assessed $0.40 per contract. Specialists and Market Makers would continue to be assessed a lower electronic Penny Pilot Options Transaction Charge of $0.22 per contract. Unlike other market participants, Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\25\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Customers continue to be assessed no Penny Pilot Options Transaction Charge because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \25\ Id. --------------------------------------------------------------------------- The Exchange believes that it is reasonable, equitable and not unfairly discriminatory to continue to offer Professionals, Broker- Dealers and Firms the opportunity to reduce electronic Complex Orders in Penny Pilot Options as compared to non-Penny Pilot Options because the Exchange seeks to incentivize Professionals, Broker-Dealers and Firms to execute Complex Penny Pilot Options orders. Also, lowering the electronic Options Transaction Charges for Complex Orders, as compared to Simple Orders is reasonable, equitable and not unfairly discriminatory because the Exchange desires to continue to incentivize these market participants to transact Complex Orders on the Exchange. The fees will be applied uniformly to all market participants. Non-Penny Pilot The Exchange's proposal to amend its Professional, Broker-Dealer and Firm electronic non-Penny Pilot Options Transaction Charges for Complex Orders by removing the applicability of note 2 in the Pricing Schedule and increasing the fee to $0.75 per contract is reasonable because Professionals, Broker-Dealers and Firms transacting electronic non-Penny Pilot Options Transaction Charges would be uniformly assessed a fee of $0.75 per contract for Simple and Complex Orders. Members may still lower this rate if they qualified for the reduced rebate offered in note 3 in the Pricing Schedule, which note is also being amended with this proposal. Despite the inapplicability of note 2, the Exchange believes the non-Penny Pilot Options Transaction Charges for electronic Complex Order transactions remain competitive. The Exchange's proposal to amend its Professional, Broker-Dealer and Firm electronic non-Penny Pilot Options Transaction Charges for Complex Orders by removing the applicability of note 2 in the Pricing Schedule and increasing the fee to $0.75 per contract is equitable and not unfairly discriminatory because Professionals, Broker-Dealers and Firms transacting electronic non-Penny Pilot Options Transaction Charges would be uniformly assessed a fee of $0.75 per contract for Simple and Complex Orders. Specialists and Market Makers would continue to be assessed a lower electronic non-Penny Pilot Options Transaction Charge of $0.25 per contract. Unlike other market participants, Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\26\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Customers continue to be assessed no non-Penny Pilot Options Transaction Charge because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \26\ Id. --------------------------------------------------------------------------- The Exchange's proposal to amend note 3 in the Pricing Schedule to increase the amount a member or member organization under Common Ownership with another member or member organization or an Appointed OFP of an Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule will be assessed and increase the Professional, Broker-Dealer or Firm electronic non-Penny Pilot Options Transaction Charge of from $0.60 to $0.65 per contract is reasonable because Professionals, Broker-Dealers and Firms may continue to qualify for a lower rate. Professionals, Broker-Dealers and Firms that do not qualify for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule would continue to pay an electronic non-Penny Pilot Options Transaction Charge of $0.75 per contract. While amendment reduces the savings, the Exchange will continue to offer Professionals, Broker-Dealers and Firms that qualify by sending the requisite order flow to the Exchange a lower transaction fee. In addition, attracting Customer order flow benefits all market participants with increased order flow with which to interact. The Exchange's proposal to amend note 3 in the Pricing Schedule to increase the amount a member or member organization under Common Ownership with another member or member organization or an Appointed OFP of an Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule will be assessed and increase the Professional, Broker-Dealer or Firm electronic non-Penny Pilot Options Transaction Charge of [sic] from $0.60 to $0.65 per contract is equitable and not unfairly discriminatory because these market participants are subject to the highest transaction fees of $0.75 per contract. The Exchange's proposal to correct the typographical error in footnote 3 is [[Page 10938]] reasonable, equitable and not unfairly discriminatory because it correct [sic] a grammatical error. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. In terms of intra-market competition, the Exchange believes that its proposed rebates and fees continue to remain competitive in SPY and Multiply Listed Options. In sum, if the changes proposed herein are unattractive to market participants, it is likely that the Exchange will lose market share as a result. Accordingly, the Exchange does not believe that the proposed changes will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. Proposed Amendments to Section I: Rebates and Fees for Adding and Removing Liquidity in SPY Simple Order The Exchange's proposal to amend the Simple Order Rebates for Adding Liquidity which are paid to Specialists and Market Makers by reducing the number of tiers from 6 tiers to 5 tiers and reducing the Tier 2 rebate to $0.18 per contract, reducing the Tier 3 rebate to $0.21 per contract, amending the Tier 4 monthly volume to 20,000 to 49,999 contracts per day and the rebate to $0.31 per contract, eliminating Tier 5 and renaming Tier 6 to new Tier 5 does not impose an undue burden on intra-market competition because Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\27\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \27\ Id. --------------------------------------------------------------------------- The Exchange's proposal to rename the column entitled ``Monthly Volume'' as ``Average Daily Volume (``ADV'')'' does not impose an undue burden on intra-market competition because the title more accurately describes the manner in which the rebate is calculated, which is adding the requisite amount of electronically executed Specialist and Market Maker Simple Order contracts per day in a month in SPY, as noted in Part A of Section I of the Pricing Schedule. This proposed change does not impact the manner in which the Exchange calculates these rebates today. The Exchange's proposal to amend the Simple Order Fees for Removing Liquidity for Specialists, Market Makers, Firms, Broker Dealers and Professionals by increasing the fees from $0.47 to $0.48 per contract does not impose an undue burden on intra-market competition because all participants would continue to be assessed a similar fee, except for Customers. The Exchange believes that assessing Customers a lower fee does not impose a burden on intra-market competition because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Complex Order The Exchange's proposal to amend its Complex Order Fees for Removing Liquidity for Specialists and Market Makers by increasing the fees from $0.40 to $0.43 per contract does not impose an undue burden on intra-market competition. Unlike other market participants, Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\28\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Customers continue to be assessed no Complex Order Fee for Removing Liquidity because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \28\ Id. --------------------------------------------------------------------------- Proposed Amendments to Section II: Multiple Listed Options Fees Penny Pilot Options The Exchange's proposal to amend its Professional, Broker-Dealer and Firm electronic Penny Pilot Options Transaction Charges for Complex Orders from $0.35 per contract to $0.40 per contract does not impose an undue burden on intra-market competition because Professionals, Broker- Dealers and Firms would be uniformly assessed [[Page 10939]] $0.40 per contract. Specialists and Market Makers would continue to be assessed a lower electronic Penny Pilot Options Transaction Charge of $0.22 per contract. Unlike other market participants, Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\29\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Customers continue to be assessed no Penny Pilot Options Transaction Charge because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \29\ Id. --------------------------------------------------------------------------- Non-Penny Pilot Options The Exchange's proposal to amend its Professional, Broker-Dealer and Firm electronic non-Penny Pilot Options Transaction Charges for Complex Orders by removing the applicability of note 2 in the Pricing Schedule and increasing the fee to $0.75 per contract does not impose an undue burden on intra-market competition because Professionals, Broker-Dealers and Firms transacting electronic non-Penny Pilot Options Transaction Charges would be uniformly assessed a fee of $0.75 per contract. Specialists and Market Makers would continue to be assessed a lower electronic non-Penny Pilot Options Transaction Charge of $0.25 per contract. Unlike other market participants, Specialists and Market Makers have obligations to the market and regulatory requirements, which normally do not apply to other market participants.\30\ They have obligations to make continuous markets, engage in a course of dealings reasonably calculated to contribute to the maintenance of a fair and orderly market, and not make bids or offers or enter into transactions that are inconsistent with a course of dealings. The differentiation as between Specialists and Market Makers and all other market participants recognizes the differing contributions made to the liquidity and trading environment on the Exchange by these market participants. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. Customers continue to be assessed no non-Penny Pilot Options Transaction Charge because Customer orders bring valuable liquidity to the market, which liquidity benefits other market participants. Customer liquidity benefits all market participants by providing more trading opportunities, which attracts Specialists and Market Makers. An increase in the activity of these market participants in turn facilitates tighter spreads, which may cause an additional corresponding increase in order flow from other market participants. --------------------------------------------------------------------------- \30\ Id. --------------------------------------------------------------------------- The Exchange believes that it does not impose an undue burden on intra-market competition to continue to offer Professionals, Broker- Dealers and Firms the opportunity to reduce electronic Complex Orders in non-Penny Pilot Options as compared to Penny Pilot Options because the Options Transaction Charges for non-Penny Pilot Options are higher. Also, only lowering the electronic Options Transaction Charges for Complex Orders, as compared to Simple Orders does not impose an undue burden on intra-market competition because the Exchange desires to continue to incentivize these market participants to transact Complex Orders on the Exchange. The Exchange's proposal to amend note 3 in the Pricing Schedule to increase the amount a member or member organization under Common Ownership with another member or member organization or an Appointed OFP of an Affiliated Entity that qualifies for Customer Rebate Tiers 4 or 5 in Section B of the Pricing Schedule will be assessed and increase the Professional, Broker-Dealer or Firm electronic non-Penny Pilot Options Transaction Charge of from $0.60 to $0.65 per contract does not impose an undue burden on intra-market competition because these market participants are subject to the highest transaction fees of $0.75 per contract. The Exchange's proposal to correct the typographical error in footnote 3 does not impose an undue burden on intra-market competition because it correct [sic] a grammatical error. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.\31\ --------------------------------------------------------------------------- \31\ 15 U.S.C. 78s(b)(3)(A)(ii). --------------------------------------------------------------------------- At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to rule-comments@sec.gov. Please include File Number SR-Phlx-2017-09 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-Phlx-2017-09. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/ [[Page 10940]] rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR- Phlx-2017-09, and should be submitted on or before March 9, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\32\ --------------------------------------------------------------------------- \32\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-03099 Filed 2-15-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 31 / Thursday, February 16, 2017 / Notices 10933
other things, to prevent fraudulent and to a T+2 settlement cycle for U.S. trades prepared by the Exchange. The
manipulative acts and practices, to in equities, corporate and municipal Commission is publishing this notice to
promote just and equitable principles of bonds, and unit investment trusts.12 The solicit comments on the proposed rule
trade, to foster cooperation and ISC has identified September 5, 2017, as change from interested persons.
coordination with persons engaged in the target date for the transition to a T+2
I. Self-Regulatory Organization’s
regulating, clearing, settling, processing settlement cycle to occur.13
For the reasons noted above, the Statement of the Terms of Substance of
information with respect to, and
Commission finds that the proposal is the Proposed Rule Change
facilitating transactions in securities, to
remove impediments to and perfect the consistent with the requirements of the The Exchange proposes to amend the
mechanism of a free and open market Act and would foster cooperation and Exchange’s Pricing Schedule at Section
and a national market system, and to coordination with persons engaged in I, entitled ‘‘Rebates and Fees for Adding
protect investors and the public interest. regulating, clearing, settling, processing and Removing Liquidity in SPY,’’ and
As noted above, the Commission information with respect to, and Section II, entitled ‘‘Multiply Listed
received two comment letters on the facilitating transactions in securities, to Options Fees’’ 3 to amend various
proposed rule change.8 Both comment remove impediments to and perfect the transaction fees and rebates.
letters express support for Commission mechanism of a free and open market The text of the proposed rule change
approval of the proposed rule change. and a national market system, and to is available on the Exchange’s Web site
The Commission notes that the protect investors and the public interest. at http://nasdaqphlx.cchwallstreet
proposal would amend the Exchange’s .com/, at the principal office of the
rules to conform to the amendment that IV. Conclusion Exchange, and at the Commission’s
the Commission has proposed to Rule It is therefore ordered, pursuant to Public Reference Room.
15c6–1(a) under the Act 9 and support a Section 19(b)(2) of the Act,14 that the
proposed rule change (SR–NYSE–2016– II. Self-Regulatory Organization’s
move to a T+2 standard settlement
87), be and hereby is, approved. Statement of the Purpose of, and
cycle. In the T+2 Proposing Release the
Statutory Basis for, the Proposed Rule
Commission stated its preliminary belief For the Commission, by the Division of Change
that shortening the standard settlement Trading and Markets, pursuant to delegated
cycle from T+3 to T+2 will result in a authority.15 In its filing with the Commission, the
reduction of credit, market, and Eduardo A. Aleman, Exchange included statements
liquidity risk,10 and as a result a Assistant Secretary. concerning the purpose of and basis for
reduction in systemic risk for U.S. [FR Doc. 2017–03110 Filed 2–15–17; 8:45 am]
the proposed rule change and discussed
market participants.11 The Commission any comments it received on the
BILLING CODE 8011–01–P
also notes that it has not yet adopted the proposed rule change. The text of these
proposed amendment to Rule 15c6–1(a) statements may be examined at the
under the Act and that the Exchange SECURITIES AND EXCHANGE places specified in Item IV below. The
has, accordingly, not proposed to make COMMISSION Exchange has prepared summaries, set
its amended rules operative at present. forth in sections A, B, and C below, of
Instead, the Exchange has proposed to [Release No. 34–80008; File No. SR–Phlx– the most significant aspects of such
2017–09] statements.
announce the operative date of the
Exchange’s proposal via Information Self-Regulatory Organizations; A. Self-Regulatory Organization’s
Memo and by filing a separate proposed NASDAQ PHLX LLC; Notice of Filing Statement of the Purpose of, and
rule change. The Commission expects and Immediate Effectiveness of Statutory Basis for, the Proposed Rule
that the operative date of the proposed Proposed Rule Change To Amend Change
rule change would correspond with the Sections I and II of the Pricing
compliance date of any amendment to Schedule 1. Purpose
Rule 15c6–1(a) that is adopted by the The purpose of the proposed rule
Commission. The Commission notes February 10, 2017. change is to amend the Exchange’s
that, in October 2014, Depository Trust Pursuant to Section 19(b)(1) of the Pricing Schedule at Section I, entitled
and Clearing Corporation, in Securities Exchange Act of 1934 ‘‘Rebates and Fees for Adding and
collaboration with the Investment (‘‘Act’’),1 and Rule 19b–4 thereunder,2 Removing Liquidity in SPY,’’ to (i)
Company Institute, SIFMA, and other notice is hereby given that, on February amend the Simple Order Rebate for
market participants, formed an Industry 1, 2017, NASDAQ PHLX LLC (‘‘Phlx’’ or Adding Liquidity which is paid to
Steering Group (‘‘ISC’’) and an industry ‘‘Exchange’’) filed with the Securities Specialists 4 and Market Makers; 5
working group to facilitate the transition and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule 3 Multiply Listed Options includes options
8 See supra note 5. change as described in Items I, II, and overlying equities, ETFs, ETNs and indexes which
9 See supra note 3. are Multiply Listed.
III below, which Items have been
10 Credit risk refers to the risk that the credit 4 The term ‘‘Specialist’’ applies to transactions for
quality of one party to a transaction will deteriorate 12 See Press Release, DTCC, Industry Steering the account of a Specialist (as defined in Exchange
to the extent that it is unable to fulfill its obligations Rule 1020(a)).
Committee and Working Group Formed to Drive
to its counterparty on settlement date. Market risk 5 The term ‘‘Market Maker’’ describes fees and
Implementation of T+2 in the U.S. (Oct. 2014),
refers to the risk that the value of securities bought rebates applicable to Registered Options Traders
http://www.dtcc.com/news/2014/october/16/
and sold will change between trade execution and
asabaliauskas on DSK3SPTVN1PROD with NOTICES
ust2.aspx. (‘‘ROT’’), Streaming Quote Traders (‘‘SQT’’) and
settlement such that the completion of the trade 13 See Press Release, ISC, US T+2 ISC Remote Streaming Quote Traders (‘‘RSQT’’). A ROT
would result in a financial loss. Liquidity risk is defined in Exchange Rule 1014(b) as a regular
describes the risk that an entity will be unable to Recommends Move to Shorter Settlement Cycle On
member of the Exchange located on the trading
meet financial obligations on time due to an September 5, 2017 (Mar. 7, 2016), http://
floor who has received permission from the
inability to deliver funds or securities in the form www.ust2.com/pdfs/T2-ISC-recommends-shorter-
Exchange to trade in options for his own account.
required though it may possess sufficient financial settlement-030716.pdf.
14 15 U.S.C. 78s(b)(2).
A ROT includes SQTs and RSQTs as well as on and
resources in other forms. See T+2 Proposing off-floor ROTS. An SQT is defined in Exchange
15 17 CFR 200.30–3(a)(12).
Release, supra note 3, 81 FR at 69241 n. 3. Rule 1014(b)(ii)(A) as an ROT who has received
11 See T+2 Proposing Release, supra note 3, 81 FR 1 15 U.S.C. 78s(b)(1).
permission from the Exchange to generate and
at 69241. 2 17 CFR 240.19b–4. Continued
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![Federal Register / Vol. 82, No. 31 / Thursday, February 16, 2017 / Notices 10935
Proposed Amendments to Section II: organization or an Appointed OFP of an approach in evaluating the fairness of
Multiple Listed Options Fees Affiliated Entity that qualifies for market data fees against a challenge
Penny Pilot Options Customer Rebate Tiers 4 or 5 in Section claiming that Congress mandated a cost-
B of the Pricing Schedule 15 will be based approach.20 As the court
The Exchange proposes to amend its assessed a Professional, Broker-Dealer or emphasized, the Commission ‘‘intended
Professional, Broker-Dealer and Firm Firm electronic non-Penny Pilot in Regulation NMS that ‘market forces,
electronic Penny Pilot Options Options Transaction Charge of $0.60 per rather than regulatory requirements’
Transaction Charges for Complex contract. The Exchange proposes to play a role in determining the market
Orders. Today, the Exchange assesses amend the fee to assess $0.65 per data . . . to be made available to
Professionals, Broker-Dealers and Firms contract. The qualifications for the investors and at what cost.’’ 21
an electronic Penny Pilot Options reduced rate remain the same. Further, ‘‘[n]o one disputes that
Transaction Charges for Complex Orders Professionals, Broker-Dealers and Firms competition for order flow is ‘fierce.’
of $0.35 per contract. The Exchange that do not qualify for Customer Rebate . . . As the SEC explained, ‘[i]n the U.S.
proposes to increase the Professional, Tiers 4 or 5 in Section B of the Pricing national market system, buyers and
Broker-Dealer and Firm electronic Schedule would continue to pay an sellers of securities, and the broker-
Penny Pilot Options Transaction electronic non-Penny Pilot Options dealers that act as their order-routing
Charges for Complex Orders to $0.40 per Transaction Charge of $0.75 per agents, have a wide range of choices of
contract. Despite the increase to this fee, contract. While the Exchange is where to route orders for execution’;
the Exchange believes the Penny Pilot amending the fee so that the reduction [and] ‘no exchange can afford to take its
Options Transaction Charges for is not as great as today, the Exchange market share percentages for granted’
electronic Complex Order transactions will continue to offer a reduced rate to because ‘no exchange possesses a
remain competitive. Professionals, Professionals, Broker-Dealers and Firms monopoly, regulatory or otherwise, in
Broker-Dealers and Firms will continue that qualify by sending the requisite the execution of order flow from broker
to be offered a discounted rate as order flow to the Exchange. dealers’ . . . .’’ 22 Although the court
compared to Simple Orders.14 Finally, the Exchange is adding a and the SEC were discussing the cash
Non-Penny Pilot Options period at end of the sentence in footnote equities markets, the Exchange believes
3 to correct a typographical error. that these views apply with equal force
The Exchange proposes to amend its
Professional, Broker-Dealer and Firm 2. Statutory Basis to the options markets.
electronic non-Penny Pilot Options The Exchange believes that its Proposed Amendments to Section I:
Transaction Charges for Complex proposal is consistent with Section 6(b) Rebates and Fees for Adding and
Orders. Today, the Exchange assesses of the Act,16 in general, and furthers the Removing Liquidity in SPY
Professionals, Broker-Dealers and Firms objectives of Sections 6(b)(4) and 6(b)(5)
an electronic non-Penny Pilot Options Simple Order
of the Act,17 in particular, in that it
Transaction Charges for Complex Orders provides for the equitable allocation of The Exchange’s proposal to amend
of $0.35 per contract. The Exchange is reasonable dues, fees and other charges the Simple Order Rebates for Adding
proposing to remove the applicability of among members and issuers and other Liquidity which are paid to Specialists
note 2 in the Pricing Schedule from the persons using any facility, and is not and Market Makers by reducing the
non-Penny Pilot Options Transaction designed to permit unfair number of tiers from 6 tiers to 5 tiers
Charges for Professionals, Broker- discrimination between customers, and reducing the Tier 2 rebate to $0.18
Dealers and Firms. With this proposal, issuers, brokers, or dealers. per contract, reducing the Tier 3 rebate
Professional, Broker-Dealer and Firm The Commission and the courts have to $0.21 per contract, amending the Tier
electronic non-Penny Pilot Options repeatedly expressed their preference 4 monthly volume to 20,000 to 49,999
Transaction Charges for Complex Orders for competition over regulatory contracts per day and the rebate to $0.31
would be increased to $0.75 per contract intervention in determining prices, per contract, eliminating Tier 5 and
because the reduced rate would no products, and services in the securities renaming Tier 6 to new Tier 5 is
longer apply. Members may still lower markets. In Regulation NMS, while reasonable because the Exchange
this rate if they qualified for the reduced adopting a series of steps to improve the believes that the proposed five tier
rebate offered in note 3 in the Pricing current market model, the Commission rebate structure will incentivize market
Schedule, which note is also being highlighted the importance of market participants to add a greater amount of
amended with this proposal as noted forces in determining prices and SRO Specialist and Market Maker liquidity in
below. As proposed, the Options revenues and, also, recognized that SPY on the Exchange to obtain higher
Transaction Charge for Simple and current regulation of the market system rebates. A Specialist or Market Maker
Complex Order electronic non-Penny ‘‘has been remarkably successful in would continue to receive a rebate with
Pilot Options Transaction Charges promoting market competition in its this proposal provided they execute one
would be the same fee of $0.75 per broader forms that are most important to electronic Simple Order SPY contract.
contract fee. investors and listed companies.’’ 18 In some cases, the rebate will be
The Exchange also proposes to amend Likewise, in NetCoalition v. Securities lower. When 2,500 to 4,999 electronic
its Professional, Broker-Dealer and Firm and Exchange Commission 19 Simple Order SPY contracts per day are
electronic non-Penny Pilot Options (‘‘NetCoalition’’) the D.C. Circuit upheld added, the SPY Simple Order Rebate for
Transaction Charges by amending note the Commission’s use of a market-based Adding Liquidity for Specialists and
asabaliauskas on DSK3SPTVN1PROD with NOTICES
3 in the Pricing Schedule. Today, note Market Makers will be $0.18 per
3 provides that any member or member 15 See note 10 above. contract as compared to $0.20 per
organization under Common Ownership 16 15 U.S.C. 78f(b).
with another member or member 17 15 U.S.C. 78f(b)(4) and (5). 20 See NetCoalition, at 534—535.
18 Securities Exchange Act Release No. 51808 21 Id. at 537.
14 The Exchange would continue to assess an (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 22 Id. at 539 (quoting Securities Exchange Act
electronic Penny Pilot Options Transaction Charges (‘‘Regulation NMS Adopting Release’’). Release No. 59039 (December 2, 2008), 73 FR
to Professionals, Broker-Dealers and Firms of $0.48 19 NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 74770, 74782–83 (December 9, 2008) (SR–
per contract for Simple Orders. 2010). NYSEArca–2006–21)).
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![Federal Register / Vol. 82, No. 31 / Thursday, February 16, 2017 / Notices 10937
The Exchange’s proposal to amend its desires to continue to incentivize these facilitates tighter spreads, which may
Professional, Broker-Dealer and Firm market participants to transact Complex cause an additional corresponding
electronic Penny Pilot Options Orders on the Exchange. The fees will increase in order flow from other market
Transaction Charges for Complex Orders be applied uniformly to all market participants. Customers continue to be
from $0.35 per contract to $0.40 per participants. assessed no non-Penny Pilot Options
contract is equitable and not unfairly Transaction Charge because Customer
Non-Penny Pilot
discriminatory because Professionals, orders bring valuable liquidity to the
Broker-Dealers and Firms would be The Exchange’s proposal to amend its market, which liquidity benefits other
uniformly assessed $0.40 per contract. Professional, Broker-Dealer and Firm market participants. Customer liquidity
Specialists and Market Makers would electronic non-Penny Pilot Options benefits all market participants by
continue to be assessed a lower Transaction Charges for Complex Orders providing more trading opportunities,
electronic Penny Pilot Options by removing the applicability of note 2 which attracts Specialists and Market
Transaction Charge of $0.22 per in the Pricing Schedule and increasing Makers. An increase in the activity of
contract. Unlike other market the fee to $0.75 per contract is these market participants in turn
participants, Specialists and Market reasonable because Professionals, facilitates tighter spreads, which may
Makers have obligations to the market Broker-Dealers and Firms transacting cause an additional corresponding
and regulatory requirements, which electronic non-Penny Pilot Options increase in order flow from other market
normally do not apply to other market Transaction Charges would be participants.
participants.25 They have obligations to uniformly assessed a fee of $0.75 per The Exchange’s proposal to amend
make continuous markets, engage in a contract for Simple and Complex note 3 in the Pricing Schedule to
course of dealings reasonably calculated Orders. Members may still lower this increase the amount a member or
to contribute to the maintenance of a rate if they qualified for the reduced member organization under Common
fair and orderly market, and not make rebate offered in note 3 in the Pricing Ownership with another member or
bids or offers or enter into transactions Schedule, which note is also being member organization or an Appointed
that are inconsistent with a course of amended with this proposal. Despite the OFP of an Affiliated Entity that qualifies
dealings. The differentiation as between inapplicability of note 2, the Exchange for Customer Rebate Tiers 4 or 5 in
Specialists and Market Makers and all believes the non-Penny Pilot Options Section B of the Pricing Schedule will
other market participants recognizes the Transaction Charges for electronic be assessed and increase the
differing contributions made to the Complex Order transactions remain Professional, Broker-Dealer or Firm
liquidity and trading environment on competitive. electronic non-Penny Pilot Options
the Exchange by these market The Exchange’s proposal to amend its Transaction Charge of from $0.60 to
participants. An increase in the activity Professional, Broker-Dealer and Firm $0.65 per contract is reasonable because
of these market participants in turn electronic non-Penny Pilot Options Professionals, Broker-Dealers and Firms
facilitates tighter spreads, which may Transaction Charges for Complex Orders may continue to qualify for a lower rate.
cause an additional corresponding by removing the applicability of note 2 Professionals, Broker-Dealers and Firms
increase in order flow from other market in the Pricing Schedule and increasing that do not qualify for Customer Rebate
participants. Customers continue to be the fee to $0.75 per contract is equitable Tiers 4 or 5 in Section B of the Pricing
assessed no Penny Pilot Options and not unfairly discriminatory because Schedule would continue to pay an
Transaction Charge because Customer Professionals, Broker-Dealers and Firms electronic non-Penny Pilot Options
orders bring valuable liquidity to the transacting electronic non-Penny Pilot Transaction Charge of $0.75 per
market, which liquidity benefits other Options Transaction Charges would be contract. While amendment reduces the
market participants. Customer liquidity uniformly assessed a fee of $0.75 per savings, the Exchange will continue to
benefits all market participants by contract for Simple and Complex offer Professionals, Broker-Dealers and
providing more trading opportunities, Orders. Specialists and Market Makers Firms that qualify by sending the
which attracts Specialists and Market would continue to be assessed a lower requisite order flow to the Exchange a
Makers. An increase in the activity of electronic non-Penny Pilot Options lower transaction fee. In addition,
these market participants in turn Transaction Charge of $0.25 per attracting Customer order flow benefits
facilitates tighter spreads, which may contract. Unlike other market all market participants with increased
cause an additional corresponding participants, Specialists and Market order flow with which to interact.
increase in order flow from other market Makers have obligations to the market The Exchange’s proposal to amend
participants. and regulatory requirements, which note 3 in the Pricing Schedule to
The Exchange believes that it is normally do not apply to other market increase the amount a member or
reasonable, equitable and not unfairly participants.26 They have obligations to member organization under Common
discriminatory to continue to offer make continuous markets, engage in a Ownership with another member or
Professionals, Broker-Dealers and Firms course of dealings reasonably calculated member organization or an Appointed
the opportunity to reduce electronic to contribute to the maintenance of a OFP of an Affiliated Entity that qualifies
Complex Orders in Penny Pilot Options fair and orderly market, and not make for Customer Rebate Tiers 4 or 5 in
as compared to non-Penny Pilot Options bids or offers or enter into transactions Section B of the Pricing Schedule will
because the Exchange seeks to that are inconsistent with a course of be assessed and increase the
incentivize Professionals, Broker- dealings. The differentiation as between Professional, Broker-Dealer or Firm
Specialists and Market Makers and all electronic non-Penny Pilot Options
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Dealers and Firms to execute Complex
Penny Pilot Options orders. Also, other market participants recognizes the Transaction Charge of [sic] from $0.60 to
lowering the electronic Options differing contributions made to the $0.65 per contract is equitable and not
Transaction Charges for Complex liquidity and trading environment on unfairly discriminatory because these
Orders, as compared to Simple Orders is the Exchange by these market market participants are subject to the
reasonable, equitable and not unfairly participants. An increase in the activity highest transaction fees of $0.75 per
discriminatory because the Exchange of these market participants in turn contract.
The Exchange’s proposal to correct
25 Id. 26 Id. the typographical error in footnote 3 is
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![10938 Federal Register / Vol. 82, No. 31 / Thursday, February 16, 2017 / Notices
reasonable, equitable and not unfairly per contract, reducing the Tier 3 rebate An increase in the activity of these
discriminatory because it correct [sic] a to $0.21 per contract, amending the Tier market participants in turn facilitates
grammatical error. 4 monthly volume to 20,000 to 49,999 tighter spreads, which may cause an
contracts per day and the rebate to $0.31 additional corresponding increase in
B. Self-Regulatory Organization’s
per contract, eliminating Tier 5 and order flow from other market
Statement on Burden on Competition renaming Tier 6 to new Tier 5 does not participants.
The Exchange does not believe that impose an undue burden on intra-
the proposed rule change will impose market competition because Specialists Complex Order
any burden on competition not and Market Makers have obligations to The Exchange’s proposal to amend its
necessary or appropriate in furtherance the market and regulatory requirements, Complex Order Fees for Removing
of the purposes of the Act. In terms of which normally do not apply to other Liquidity for Specialists and Market
inter-market competition, the Exchange market participants.27 They have Makers by increasing the fees from
notes that it operates in a highly obligations to make continuous markets, $0.40 to $0.43 per contract does not
competitive market in which market engage in a course of dealings impose an undue burden on intra-
participants can readily favor competing reasonably calculated to contribute to market competition. Unlike other
venues if they deem fee levels at a the maintenance of a fair and orderly market participants, Specialists and
particular venue to be excessive, or market, and not make bids or offers or Market Makers have obligations to the
rebate opportunities available at other enter into transactions that are market and regulatory requirements,
venues to be more favorable. In such an inconsistent with a course of dealings. which normally do not apply to other
environment, the Exchange must The differentiation as between market participants.28 They have
continually adjust its fees to remain Specialists and Market Makers and all obligations to make continuous markets,
competitive with other exchanges and other market participants recognizes the engage in a course of dealings
with alternative trading systems that differing contributions made to the reasonably calculated to contribute to
have been exempted from compliance liquidity and trading environment on the maintenance of a fair and orderly
with the statutory standards applicable the Exchange by these market market, and not make bids or offers or
to exchanges. Because competitors are participants. An increase in the activity enter into transactions that are
free to modify their own fees in of these market participants in turn inconsistent with a course of dealings.
response, and because market facilitates tighter spreads, which may The differentiation as between
participants may readily adjust their cause an additional corresponding Specialists and Market Makers and all
order routing practices, the Exchange increase in order flow from other market other market participants recognizes the
believes that the degree to which fee participants. differing contributions made to the
changes in this market may impose any The Exchange’s proposal to rename liquidity and trading environment on
burden on competition is extremely the column entitled ‘‘Monthly Volume’’ the Exchange by these market
limited. In sum, if the changes proposed as ‘‘Average Daily Volume (‘‘ADV’’)’’ participants. An increase in the activity
herein are unattractive to market does not impose an undue burden on of these market participants in turn
participants, it is likely that the intra-market competition because the facilitates tighter spreads, which may
Exchange will lose market share as a title more accurately describes the cause an additional corresponding
result. Accordingly, the Exchange does manner in which the rebate is increase in order flow from other market
not believe that the proposed changes calculated, which is adding the requisite participants. Customers continue to be
will impair the ability of members or amount of electronically executed assessed no Complex Order Fee for
competing order execution venues to Specialist and Market Maker Simple Removing Liquidity because Customer
maintain their competitive standing in Order contracts per day in a month in orders bring valuable liquidity to the
the financial markets. SPY, as noted in Part A of Section I of market, which liquidity benefits other
In terms of intra-market competition, the Pricing Schedule. This proposed market participants. Customer liquidity
the Exchange believes that its proposed change does not impact the manner in benefits all market participants by
rebates and fees continue to remain which the Exchange calculates these providing more trading opportunities,
competitive in SPY and Multiply Listed rebates today. which attracts Specialists and Market
The Exchange’s proposal to amend
Options. In sum, if the changes Makers. An increase in the activity of
the Simple Order Fees for Removing
proposed herein are unattractive to these market participants in turn
Liquidity for Specialists, Market
market participants, it is likely that the facilitates tighter spreads, which may
Makers, Firms, Broker Dealers and
Exchange will lose market share as a cause an additional corresponding
Professionals by increasing the fees from
result. Accordingly, the Exchange does $0.47 to $0.48 per contract does not increase in order flow from other market
not believe that the proposed changes impose an undue burden on intra- participants.
will impair the ability of members or market competition because all Proposed Amendments to Section II:
competing order execution venues to participants would continue to be Multiple Listed Options Fees
maintain their competitive standing in assessed a similar fee, except for
the financial markets. Penny Pilot Options
Customers. The Exchange believes that
Proposed Amendments to Section I: assessing Customers a lower fee does The Exchange’s proposal to amend its
Rebates and Fees for Adding and not impose a burden on intra-market Professional, Broker-Dealer and Firm
competition because Customer orders electronic Penny Pilot Options
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Removing Liquidity in SPY
bring valuable liquidity to the market, Transaction Charges for Complex Orders
Simple Order from $0.35 per contract to $0.40 per
which liquidity benefits other market
The Exchange’s proposal to amend participants. Customer liquidity benefits contract does not impose an undue
the Simple Order Rebates for Adding all market participants by providing burden on intra-market competition
Liquidity which are paid to Specialists more trading opportunities, which because Professionals, Broker-Dealers
and Market Makers by reducing the attracts Specialists and Market Makers. and Firms would be uniformly assessed
number of tiers from 6 tiers to 5 tiers
and reducing the Tier 2 rebate to $0.18 27 Id. 28 Id.
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![Federal Register / Vol. 82, No. 31 / Thursday, February 16, 2017 / Notices 10939
$0.40 per contract. Specialists and participants.30 They have obligations to competition because these market
Market Makers would continue to be make continuous markets, engage in a participants are subject to the highest
assessed a lower electronic Penny Pilot course of dealings reasonably calculated transaction fees of $0.75 per contract.
Options Transaction Charge of $0.22 per to contribute to the maintenance of a The Exchange’s proposal to correct
contract. Unlike other market fair and orderly market, and not make the typographical error in footnote 3
participants, Specialists and Market bids or offers or enter into transactions does not impose an undue burden on
Makers have obligations to the market that are inconsistent with a course of intra-market competition because it
and regulatory requirements, which dealings. The differentiation as between correct [sic] a grammatical error.
normally do not apply to other market Specialists and Market Makers and all
C. Self-Regulatory Organization’s
participants.29 They have obligations to other market participants recognizes the
Statement on Comments on the
make continuous markets, engage in a differing contributions made to the
liquidity and trading environment on Proposed Rule Change Received From
course of dealings reasonably calculated Members, Participants, or Others
to contribute to the maintenance of a the Exchange by these market
fair and orderly market, and not make participants. An increase in the activity No written comments were either
bids or offers or enter into transactions of these market participants in turn solicited or received.
that are inconsistent with a course of facilitates tighter spreads, which may III. Date of Effectiveness of the
dealings. The differentiation as between cause an additional corresponding
Proposed Rule Change and Timing for
Specialists and Market Makers and all increase in order flow from other market
Commission Action
other market participants recognizes the participants. Customers continue to be
differing contributions made to the assessed no non-Penny Pilot Options The foregoing rule change has become
liquidity and trading environment on Transaction Charge because Customer effective pursuant to Section
the Exchange by these market orders bring valuable liquidity to the 19(b)(3)(A)(ii) of the Act.31
participants. An increase in the activity market, which liquidity benefits other At any time within 60 days of the
of these market participants in turn market participants. Customer liquidity filing of the proposed rule change, the
facilitates tighter spreads, which may benefits all market participants by Commission summarily may
cause an additional corresponding providing more trading opportunities, temporarily suspend such rule change if
increase in order flow from other market which attracts Specialists and Market it appears to the Commission that such
participants. Customers continue to be Makers. An increase in the activity of action is: (i) Necessary or appropriate in
assessed no Penny Pilot Options these market participants in turn the public interest; (ii) for the protection
Transaction Charge because Customer facilitates tighter spreads, which may of investors; or (iii) otherwise in
orders bring valuable liquidity to the cause an additional corresponding furtherance of the purposes of the Act.
market, which liquidity benefits other increase in order flow from other market If the Commission takes such action, the
market participants. Customer liquidity participants. Commission shall institute proceedings
benefits all market participants by The Exchange believes that it does not to determine whether the proposed rule
providing more trading opportunities, impose an undue burden on intra- should be approved or disapproved.
which attracts Specialists and Market market competition to continue to offer
IV. Solicitation of Comments
Makers. An increase in the activity of Professionals, Broker-Dealers and Firms
the opportunity to reduce electronic Interested persons are invited to
these market participants in turn
Complex Orders in non-Penny Pilot submit written data, views, and
facilitates tighter spreads, which may
Options as compared to Penny Pilot arguments concerning the foregoing,
cause an additional corresponding
Options because the Options including whether the proposed rule
increase in order flow from other market
Transaction Charges for non-Penny Pilot change is consistent with the Act.
participants.
Options are higher. Also, only lowering Comments may be submitted by any of
Non-Penny Pilot Options the electronic Options Transaction the following methods:
Charges for Complex Orders, as
The Exchange’s proposal to amend its Electronic Comments
compared to Simple Orders does not
Professional, Broker-Dealer and Firm impose an undue burden on intra- • Use the Commission’s Internet
electronic non-Penny Pilot Options market competition because the comment form (http://www.sec.gov/
Transaction Charges for Complex Orders Exchange desires to continue to rules/sro.shtml); or
by removing the applicability of note 2 incentivize these market participants to • Send an email to rule-comments@
in the Pricing Schedule and increasing transact Complex Orders on the sec.gov. Please include File Number SR–
the fee to $0.75 per contract does not Exchange. Phlx–2017–09 on the subject line.
impose an undue burden on intra- The Exchange’s proposal to amend
market competition because Paper Comments
note 3 in the Pricing Schedule to
Professionals, Broker-Dealers and Firms increase the amount a member or • Send paper comments in triplicate
transacting electronic non-Penny Pilot member organization under Common to Brent J. Fields, Secretary, Securities
Options Transaction Charges would be Ownership with another member or and Exchange Commission, 100 F Street
uniformly assessed a fee of $0.75 per member organization or an Appointed NE., Washington, DC 20549–1090.
contract. Specialists and Market Makers OFP of an Affiliated Entity that qualifies All submissions should refer to File
would continue to be assessed a lower for Customer Rebate Tiers 4 or 5 in Number SR–Phlx–2017–09. This file
electronic non-Penny Pilot Options Section B of the Pricing Schedule will number should be included on the
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Transaction Charge of $0.25 per be assessed and increase the subject line if email is used. To help the
contract. Unlike other market Professional, Broker-Dealer or Firm Commission process and review your
participants, Specialists and Market electronic non-Penny Pilot Options comments more efficiently, please use
Makers have obligations to the market Transaction Charge of from $0.60 to only one method. The Commission will
and regulatory requirements, which $0.65 per contract does not impose an post all comments on the Commission’s
normally do not apply to other market undue burden on intra-market Internet Web site (http://www.sec.gov/
29 Id. 30 Id. 31 15 U.S.C. 78s(b)(3)(A)(ii).
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![10940 Federal Register / Vol. 82, No. 31 / Thursday, February 16, 2017 / Notices
rules/sro.shtml). Copies of the 19b–4 thereunder,2 a proposed rule Exchange Rule 64(a)(ii)—Equities
submission, all subsequent change to conform its rules to an currently provides that on the second
amendments, all written statements amendment proposed by the and third business days preceding the
with respect to the proposed rule Commission to Rule 15c6–1(a) under final day for subscription, bids and
change that are filed with the the Act to shorten the standard offers in rights to subscribe shall be
Commission, and all written settlement cycle for most broker-dealer made only ‘‘next day.’’ To conform with
communications relating to the transactions from three business days the move to a T+2 settlement cycle,
proposed rule change between the after the trade date (‘‘T+3’’) to two proposed Exchange Rule 64T(a)(ii)—
Commission and any person, other than business days after the trade date Equities would delete the reference to
those that may be withheld from the (‘‘T+2’’).3 The proposed rule change was the third business day preceding the
public in accordance with the published for comment in the Federal final day for subscription because in a
provisions of 5 U.S.C. 552, will be Register on December 29, 2016.4 The T+2 settlement cycle, bids and offers in
available for Web site viewing and Commission received two comments on rights to subscribe on that day would
printing in the Commission’s Public the proposal, each of which supports simply be subject to ‘‘regular way’’
Reference Room, 100 F Street NE., the proposed rule change.5 This order settlement. Under Current Exchange
Washington, DC 20549 on official approves the proposed rule change. Rule 64(c)—Equities, all ‘‘seller’s
business days between the hours of option’’ trades, for delivery between 2
II. Description of the Proposal and 60 business days, should be
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for The Exchange proposes to adopt reported to the tape only in calendar
inspection and copying at the principal Equities Rules 14T—Equities (Non- days. The Exchange proposes to amend
office of the Exchange. All comments Regular Way Settlement Instructions for Exchange Rule 64T(c)—Equities to
received will be posted without change; Orders); 64T—Equities (Bonds, Rights replace the reference to ‘‘two’’ with a
the Commission does not edit personal and 100-Share-Unit Stocks); 235T— reference to ‘‘three.’’
identifying information from Equities (Ex-Dividend, Ex-Rights); Exchange Rule 235—Equities
submissions. You should submit only 236T—Equities (Ex-Warrants); 257T— provides that transactions in stocks,
information that you wish to make Equities (Deliveries After ‘‘Ex’’ Date); except those made for ‘‘cash’’ as
available publicly. All submissions 282.65T—Equities (Failure to Deliver prescribed in Exchange Rule 14—
should refer to File Number SR–Phlx– and Liability Notice Procedures); and Equities, shall be ex-dividend or ex-
2017–09, and should be submitted on or Sections 510T (Three Day Delivery Plan) rights on the second business day
before March 9, 2017. and 512T (Ex-Dividend Procedure) of preceding the record date fixed by the
the NYSE MKT Company Guide, in corporation or the date of the closing of
For the Commission, by the Division of transfer books. The Exchange proposes
Trading and Markets, pursuant to delegated order to conform the Exchange’s
rulebook to the Commission’s proposed in Exchange Rule 235T—Equities to
authority.32
amendment to Rule 15c6–1(a) under the change ‘‘second business day
Eduardo A. Aleman, preceding’’ to ‘‘business day preceding.’’
Act, which would shorten the standard
Assistant Secretary. The current Exchange Rule 235—
settlement cycle from T+3 to T+2 for
[FR Doc. 2017–03099 Filed 2–15–17; 8:45 am] Equities further provides that, if the
most broker-dealer transactions.
BILLING CODE 8011–01–P Exchange Rule 14—Equities defines record date or closing of transfer books
‘‘non-regular way’’ settlement occurs upon a day other than a business
instructions as instructions that allow day, Exchange Rule 235 shall apply for
SECURITIES AND EXCHANGE for settlement other than ‘‘regular way’’ the third preceding business day. The
COMMISSION (i.e., other than settlement on the third Exchange proposes to change ‘‘third
business day following trade date for preceding business day’’ to ‘‘second
[Release No. 34–80020; File No. SR–
NYSEMKT–2016–119] securities other than U.S. Government preceding business day’’ in proposed
Securities). Proposed Exchange Rule Exchange Rule 235T—Equities.7
Self-Regulatory Organizations; NYSE 14T—Equities would amend this Exchange Rule 236—Equities
MKT LLC; Order Granting Approval of definition to replace ‘‘third business pertaining to ex-warrants similarly
a Proposed Rule Change To Conform day’’ with ‘‘second business day.’’ provides that transactions in securities
to Proposed Amendment to Rule 15c6– Similarly, Exchange Rule 64(a)— that have subscription warrants
1(a) Under the Securities Exchange Act Equities defines ‘‘regular way’’ as ‘‘for attached, except those made for cash,
of 1934 To Shorten the Standard delivery on the third business day shall be ex-warrants on the second
Settlement Cycle for Most Broker- following the day of the contract.’’ business day preceding the date of
Dealer Transactions From Three Proposed Exchange Rule 64T(a)— expiration of the warrants, except that
Business Days After the Trade Date Equities would replace ‘‘third business when the date of expiration occurs on
(‘‘T+3’’) to Two Business Days After the day’’ with ‘‘second business day.’’ 6 a day other than a business day, the
Trade Date (‘‘T+2’’)
2 17 CFR 240.19b–4. removed from the single quote before the words
February 10, 2017. 3 See
‘‘issued’’ and ‘‘regular’’ and a missing parenthesis
Securities Exchange Act Release No. 78962 added before the word ‘‘See’’ in the second
(Sept. 28, 2016), 81 FR 69240 (Oct. 5, 2016) (File sentence of the second paragraph. Italics would also
I. Introduction No. S7–22–16) (‘‘T+2 Proposing Release’’). be removed from the single quote before the word
4 See Securities Exchange Act Release No. 79659
On December 15, 2016, NYSE MKT
asabaliauskas on DSK3SPTVN1PROD with NOTICES
‘‘seller’s’’ in five places in proposed Exchange Rule
(Dec. 22, 2016), 81 FR 84635 (Dec. 29, 2016). 64T(c)—Equities as well as before the word
LLC (‘‘NYSE MKT’’ or ‘‘Exchange’’) filed 5 See Letters from Manisha Kimmel, Chief
‘‘regular’’ in the last sentence. Finally, as reflected
with the Securities and Exchange Regulatory Officer, Wealth Management, Thomson in proposed Exchange Rule 64T(a)(1), (a)(ii) and
Commission (‘‘Commission’’), pursuant Reuters, dated January 19, 2017; and Thomas F. (b)—Equities, bold would be removed from ‘‘(a)(i),’’
to Section 19(b)(1) of the Securities Price, Managing Director, Operations, Technology & ‘‘(ii)’’ and ‘‘(b).’’
Exchange Act of 1934 (‘‘Act’’) 1 and Rule BCP, Securities Industry and Financial Markets 7 The Exchange also proposes to make non-
Association (‘‘SIFMA’’), dated January 19, 2017. substantive changes to correct punctuation in
6 The Exchange also proposes to make several proposed Exchange Rule 235T—Equities by
32 17 CFR 200.30–3(a)(12). non-substantive changes. As reflected in proposed removing italics from the single quote before the
1 15 U.S.C. 78s(b)(1). Exchange Rule 64T(a)(i)—Equities, italics would be word ‘‘cash’’ in two places.
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Document Created: 2018-02-01 15:02:27
Document Modified: 2018-02-01 15:02:27
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
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| Section | Notices | |
| FR Citation | 82 FR 10933 |
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